Insurance Terms and Definitions
Here is a glossary of common insurance terms you will see
throughout this site:
Benefit: Amount payable by the insurance company to a claimant, assignee,
or beneficiary when the insured suffers a loss.
Claim: A request by an individual (or his or her provider) to an individual's
insurance company for the insurance company to pay for services obtained
from a health care professional.
Co-Insurance: Co-insurance refers to money that an individual is required
to pay for services, after a deductible has been paid. In some health
care plans, co-insurance is called "co-payment." Co-insurance
is often specified by a percentage. For example, the employee pays 20
percent toward the changes for a service and the employer or insurance
company pays 80 percent.
Co-Payment: Co-payment is a predetermined (flat) fee that an individual
pays for health care services, in addition to what the insurance covers.
For example, some HMOs require a $10 "co-payment" for each
office visit, regardless of the type or level of services provided during
the visit. Co-payments are not usually specified by percentages.
Deductible: The amount an individual must pay for health care expenses
before insurance (or a self-insured company) covers the costs. Often,
insurance plans are based on yearly deductible amounts.
Denial Of Claim: Refusal by an insurance company to honor a request
by an individual (or his or her provider) to pay for health care services
obtained from a health care professional.
Exclusions: Medical services that are not covered by an individual's
Health Maintenance Organizations (HMO's): Health Maintenance Organizations
represent "pre-paid" or "capitated" insurance plan
in which individuals or their employers pay a fixed monthly fee for services,
instead of a separate charge for each visit or service. The monthly fees
remain the same, regardless of types or levels of services provided,
Services are provided by physicians who are employed by, or under contract
with, the HMO. HMOs vary in design. Depending on the type of the HMO,
services may be provided in a central facility, or in a physician's own
office (as with IPAs.)
Indemnity Health Plan: Indemnity health insurance plans are also called "fee-for-service." These
are the types of plans that primarily existed before the rise of HMOs,
IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined
percentage of the cost of health care services, and the insurance company
(or self-insured employer) pays the other percentage. For example, an
individual might pay 20 percent for services and the insurance company
pays 80 percent. The fees for services are defined by the providers and
vary from physician to physician. Indemnity health plans offer individuals
the freedom to choose their health care professionals.
Independent Practice Associations: IPAs are similar to HMOs, except
that individuals receive care in a physician's own office, rather than
in an HMO facility.
Maximum Dollar Limit: The maximum amount of money that an insurance
company (or self-insured company) will pay for claims within a specific
time period. Maximum dollar limits vary greatly. They may be based on
or specified in terms of types of illnesses or types of services. Sometimes
they are specified in terms of lifetime, sometimes for a year.
Out-Of-Plan: This phrase usually refers to physicians, hospitals or
other health care providers who are considered non participants in an
insurance plan (usually an HMO or PPO). Depending on an individual's
health insurance plan, expenses incurred by services provided by out-of-plan
health professionals may not be covered, or covered only in part by an
individual's insurance company.
Out-Of-Pocket Maximum: A predetermined limited amount of money that
an individual must pay out of their own savings, before an insurance
company or (self-insured employer) will pay 100 percent for an individual's
health care expenses.
Outpatient: An individual (patient) who receives health care services
(such as surgery) on an outpatient basis, meaning they do not stay overnight
in a hospital or inpatient facility. Many insurance companies have identified
a list of tests and procedures (including surgery) that will not be covered
(paid for) unless they are performed on an outpatient basis. The term
outpatient is also used synonymously with ambulatory to describe health
care facilities where procedures are performed.
Pre-Admission Certification: Also called pre-certification review, or
pre-admission review. Approval by a case manager or insurance company
representative (usually a nurse) for a person to be admitted to a hospital
or in-patient facility, granted prior to the admittance. Pre-admission
certification often must be obtained by the individual. Sometimes, however,
physicians will contact the appropriate individual. The goal of pre-admission
certification is to ensure that individuals are not exposed to inappropriate
health care services (services that are medically unnecessary).
Pre-Admission Review: A review of an individual's health care status
or condition, prior to an individual being admitted to an inpatient health
care facility, such as a hospital. Pre-admission reviews are often conducted
by case managers or insurance company representatives (usually nurses)
in cooperation with the individual, his or her physician or health care
provider, and hospitals.
Preadmission Testing: Medical tests that are completed for an individual
prior to being admitted to a hospital or inpatient health care facility.
Pre-existing Conditions: A medical condition that is excluded from coverage
by an insurance company, because the condition was believed to exist
prior to the individual obtaining a policy from the particular insurance
Preferred Provider Organizations (PPOs): You or your employer receive
discounted rates if you use doctors from a pre-selected group. If you
use a physician outside the PPO plan, you must pay more for the medical
Primary Care Provider (PCP): A health care professional (usually a physician)
who is responsible for monitoring an individual's overall health care
needs. Typically, a PCP serves as a "quarterback" for an individual's
medical care, referring the individual to more specialized physicians
for specialist care.
Policy or Plan Maximum: The total amount of payment that an insurer
is willing to pay for claim or claims incurred during the policy period
(varies by insurer).
Provider: Provider is a term used for health professionals who provide
health care services. Sometimes, the term refers only to physicians.
Often, however, the term also refers to other health care professionals
such as hospitals, nurse practitioners, chiropractors, physical therapists,
and others offering specialized health care services.
Reasonable and Customary Fees: The average fee charged by a particular
type of health care practitioner within a geographic area. The term is
often used by medical plans as the amount of money they will approve
for a specific test or procedure. If the fees are higher than the approved
amount, the individual receiving the service is responsible for paying
the difference. Sometimes, however, if an individual questions his or
her physician about the fee, the provider will reduce the charge to the
amount that the insurance company has defined as reasonable and customary.
Risk: The chance of loss, the degree of probability of loss or the amount
of possible loss to the insuring company. For an individual, risk represents
such probabilities as the likelihood of surgical complications, medications'
side effects, exposure to infection, or the chance of suffering a medical
problem because of a lifestyle or other choice. For example, an individual
increases his or her risk of getting cancer if he or she chooses to smoke
Second Opinion: It is a medical opinion provided by a second physician
or medical expert, when one physician provides a diagnosis or recommends
surgery to an individual. Individuals are encouraged to obtain second
opinions whenever a physician recommends surgery or presents an individual
with a serious medical diagnosis.
Second Surgical Opinion: These are now standard benefits in many health
insurance plans. It is an opinion provided by a second physician, when
one physician recommends surgery to an individual.
Short-Term Disability: An injury or illness that keeps a person from
working for a short time. The definition of short-term disability (and
the time period over which coverage extends) differs among insurance
companies and employers. Short-term disability insurance coverage is
designed to protect an individual's full or partial wages during a time
of injury or illness (that is not work-related) that would prohibit the
individual from working.
Triple-Option: Insurance plans that offer three options from which an
individual may choose. Usually, the three options are: traditional indemnity,
an HMO, and a PPO.
Usual, Customary and Reasonable (UCR) or Covered Expenses: An amount
customarily charged for or covered for similar services and supplies
which are medically necessary, recommended by a doctor, or required for
Waiting Period: A period of time when you are not covered by insurance
for a particular problem.
Wellness Visits: Scheduled doctors visits such as annual check ups or
physicals where the patient has not perceived any symptoms of illness
or injury before scheduling the visit.